Toward an Ethical Culture: Characteristics of an Ethical Organization

Posted on 14. Apr, 2009 by in Business Ethics

By Anne Federwisch

Kirk Hanson’s PowerPoint Presentation

“What are the signs that a company is getting it right and addressing the most important dimensions of managing ethics in an organization?” That was the question Kirk O. Hanson, executive director of the Markkula Center for Applied Ethics, addressed at a recent meeting of the Business and Organizational Ethics Partnership.

The model

Hanson built his talk on a model he devised in 1984 and has revised over the years. “We have a lot of things to draw on that we didn’t back in 1984,” he said. There has been a lot of discussion in recent years about what the signs are that a company is taking ethics seriously. The federal government’s “guidelines for prosecution” and “sentencing guidelines” encourage federal officials to identify those signs.

As a result, he said, “I think today we have a lot more sophistication of corporate practices. Also we have these other influences, this language around Sarbanes-Oxley (2002), and Stock Exchange Standards (2003), sentencing guidelines (2004), and now the McNulty version of the principles of prosecution (2006).”

Hanson’s Flow Model

The values of the organization are clarified not only in the overall corporation, but also within each unit of the corporation. The critical element is to have the executives then model those values. Through communicating the values, the company creates systems to embody those values. “If we do all of that, hopefully the values are aligned,” he explained. “But you do need these escape valves, these vehicles—whether it’s a hotline or a helpline or a committee that talks about difficult cases. You also need audit enforcement on the compliance side.”

But the model would not be complete without a renewal step. Companies like Johnson & Johnson review their values statements on a regular basis. “What they did every three years was to rewrite their credo. Maybe just a few words,” Hanson said. “One year, instead of ‘we have obligations to our employees,’ they changed it to ‘our employees and their families.’” Each renewal would lead to a new educational effort to roll out the new values.

To update and flesh out his model, Hanson discussed best practice elements—what constitutes best practices in those areas and what can go wrong. Those elements included:

  • Value statements
  • Codes of conduct
  • Executive modeling
  • Training and communication
  • Systems that embody values
  • Mechanisms to discuss difficult cases
  • Hotlines and helplines
  • Audit, enforcement, and discipline
  • Governance of ethics and values
  • Renewal process

Value statements

Ideally, values statements need to grow out of the experience of the company. An organization can’t just have single words. It needs to have concepts to go with them. “It’s not just words, but values in action—here’s what we owe to this constituency—captured in phrases and sentences,” he said.

In working with over 100 companies over the years, one of the ways he’s seen values statements go wrong is when they are unrelated to the company’s decisions and actions. For example, when he worked with the old Security Pacific Bank, the first draft of their ethics code was an incredibly aspirational document. One of the employees reviewing the document remarked, “If we rolled this out, the snicker factor would be so high. People would be laughing because the difference between our current practice and what this says is so great.”

But perhaps the worst values statement he has ever seen was at a company that wanted to convey that they didn’t take a minimal view of their role as an economic institution. But the headline they used didn’t quite capture that sentiment. It read: “to reach beyond the minimal.”

Codes of conduct

The ideal code of conduct is organized, comprehensive, and applies to all employees. While a typical values statement runs about a page, a code of conduct is usually a booklet that includes a background on policies, gives details needed to apply the policies to different departments, and includes instructive Q & A’s. “If you’re able to help interpret the code, you’re able to help explicate and answer questions,” he said.

It can go wrong if it’s written in legalese or captures last year’s trivia. Hanson read one particularly bad code that was actually fine—until it got to the section on theft of company property. “It was hilarious reading this,” he said. “Suddenly you had a page and a half about how to use taxi reimbursement forms. It was obvious that they had not been able to fire someone the year before for improper use of taxi reimbursement forms.”

But even a well-written code, he warned, is useless if it’s merely a document that sits on the shelf or has unclear application outside the United States.

Executive Modeling

What the CEO and the management team do dwarfs everything else when it comes to corporate ethics and values. They are a walking embodiment of values, day and night, in public and in private.

But they need to not only walk the walk, but also talk the talk. “The CEO tells stories about putting values to work. They’ll be sharing stories about ‘how I faced last week.’ Or ‘Here’s a problem our head of Asian operations faced, and here’s how it was resolved. That was a good way of handling the problem,’” Hanson said.

This can go wrong if an executive’s private behavior is inconsistent with the values or if he “pleasures” himself with corporate funds, as one executive put it. “This is the problem of the Smithsonian, but it’s also the problem of Kozlowski and a whole lot of other people,” Hanson remarked.

Another potential stumbling block can be if the executives never mention values or show disdain for their employees.

Training and Communication

Best practices include constant communication about values, not only for new hires, but also on a regular basis with all employees, including regular and engaging training. Training can come up short if it’s obvious that trainers and executives are only paying lip service to the values, or make snickering references to them.

One of the things Hanson worries about most as a threat to effective communication is the reductionist approach. “’Not in person,’ they’ll say, ‘it takes too much time. So let’s do it online, but maybe we don’t want to take two hours to do it online each year. Maybe we can give them a five-minute test and only if they flunked the test do they have to do our two-hour training.’” Such shortcuts, he warned, can undermine an otherwise seemingly effective program.

Systems that embody values

Creating systems that embody values requires having a performance evaluation system that has explicit references to values, having values integrated into operating systems, and examining key decisions in light of values.

But if the systems are ignored or if performance pressure or financial criteria trump values, the ethics get lost.

When Hanson studied Johnson & Johnson, he noticed that employees from throughout the organization commented on the company’s credo. “That’s a credo issue,” they’d say, in a variety of different contexts when a problem arose. “It seems to me, that’s best practice in action,” Hanson said.

Mechanisms to discuss difficult cases

Transparency needs to exist regarding tough cases, he stressed. “Employees need to be confident that they can take a tough case to the boss, even if the cost is high and they don’t know what to do.” Mechanisms, such as a corporate committee, need to be in place to vet cases. Most importantly, employees need to be confident that they will not be penalized for implementing values.

Those mechanisms are worthless, though, if there’s a “don’t ask” culture or an unwillingness of executives to share the burden.

Hotlines and helplines

In the best cases, hotlines and helplines have external and credible reporting. Anonymity is available with no possibility of retribution. And calls are followed-up effectively.

If those are lacking, if employees don’t understand the purpose of the hotlines, or if the people who answer the phones lack empathy, a hotline goes cold quickly.

Audit, enforcement, and discipline

Good rules of thumb in this category include auditing everything that is important, putting compliance into context, investigating thoroughly and respectfully, and disciplining appropriately and justly.

Conversely, companies can run into problems if compliance is the whole of the values message, if compliance and discipline are easier on executives than on front-line staff, and if the compliance system merely protects the company.

Governance of ethics and values

Best practices involve having a senior executive overseeing the ethics effort, having a dedicated ethics officer, and having an active audit or ethics committee, with periodic reporting to the board.

However, if ethics is assigned to a lower-level executive, if the ethics officer is not respected, if the audit committee is uninterested, or if reporting is merely perfunctory, the governance will be ineffective.

Renewal process

Ideally, revised values and standards should be rolled out periodically, about every three years. There should be a freshness of the message for each renewal and an engagement of the organization in the fresh message.

“One of the things that I think is powerful about the J&J model is what they call their ‘credo challenge meetings,’ where one-third of the senior staff comes to a meeting each year and talks about what’s happening in the world of credo issues that were not dealt with well or are not covered by the current policies and values statements. They build those up over three years and then they use that as input to the rewrite,” he said.

A renewal can be unsuccessful, though, if the message remains stale and unchanged, if there’s no effort to seek input from the organization, or if recent incidents are either ignored or overemphasized.

Ongoing process

Developing best practices in creating ethical cultures is, of course, an on-going process, Hanson stressed. “There’s this whole issue of individual empowerment and how we build in our senior people the sense of ethical backbone, ethical courage, personal responsibility and accountability, that should be included.”

He said he also wants to tweak the taxonomy to somehow address the issue of getting bad news to the top, getting people to recognize the ethics in what they don’t immediately think of as an ethics issue, and to somehow build into best practices the collegial, collaborative process.
Anne Federwisch is a freelance writer.

Reputation Management

Posted on 14. Apr, 2009 by in Business Ethics

Reputation Management

Reputation Management

The Internet is a bit like the old wild west, and sadly, people often post material about an individual, product, company, or service that is inaccurate or simply nasty. Businesses and individuals alike are struggling with how to best deal with online inaccuracy and defamation. The normal steps for dealing with defamation typically involve litigation, but this is not always realistic for Internet-based situations since the Internet is global, and not managed or governed by any single set of laws.If you have the good fortune of being located in the same legal jurisdiction as the offending poster and their website hosting company, you might be able to successfully prosecute them; or at the very least, you might be able to get the webpage with the offending material taken down by the website host. Keep in mind that most defamation court cases require that you show that actual harm was done by the offending material, which can often be difficult.

Of course, even if you are able to remove the initial post, cross your fingers that it was not part of a syndicated blog using RSS feeds. If the posting was syndicated, it will truly be an uphill battle to track down and remove all copies.

But despite the fact that legal action is rarely successful, do not despair — there are still some things that you can do!

1. Face It Head On
If you see a webpage or blog post that contains inaccurate information, face it head on. Contact the poster, tell them why the information is inaccurate, provide sources if appropriate, and give them the opportunity to correct it. Keep your communication professional, and stick to the factual inaccuracies; do not get into a debate about opinions.

2. Do Not Argue; Offer a Solution
Instead If there is a problem that is highlighted in the post, such as a situation where you or your company failed to react in the appropriate manner, acknowledge the problem and offer a solution. If the original post was part of a blog, post a follow-up note after the problem is resolved so that others will know that the situation was corrected and resolved.

3. It is Okay to Apologize
There is nothing wrong with apologizing when a legitimate mistake is made. In fact, consumers typically respect an individual or company when they acknowledge their mistakes and apologize for any short comings.

4. Remain Professional
Always stay professional. If the dialogue in a blog discussion degrades into a mudslinging fest, you should remain calm, take the high-road, and keep your comments and public statements professional.

5. Control Search Results
Lets face it, when something negative appears in the search engines as the result of your name, your company, or your product being searched, it can be very disconcerting. One solution is to create alternate search results, containing positive information, which will appear higher in the search results when those same keywords are searched. This sounds difficult, but really it is not. Use the standard Search Engine Optimization techniques, and watch the “positive” material inch up in the search engine rankings, which in turn forces those pages containing negative material to lower (and often ignored) positions.

None of us enjoy having our name, our company, or our product smeared and sullied online. Online libel is difficult, if not impossible, to prosecute. Learn to use the tools within your grasp to manage your reputation and minimize the impact of any defamatory comments.

About the Author:
Sharon Housley manages marketing for FeedForAll software for creating, editing, publishing RSS feeds and podcasts. In addition Sharon manages marketing for RecordForAll audio recording and editing software.

What are business ethics and what is their importance?

Posted on 14. Apr, 2009 by in Business Ethics

Business ethics are a matter of much debate. Every MBA entrant is taught the meaning of them, and yet many will never follow these guidelines in their real life careers. It has become a vast and complex field, and is the subject of much research. Business ethics encompass a large and significant portion of what it takes to do business today. Under the umbrella of business ethics comes:

  • The social responsibility that a business is supposed to have towards the community in general, particularly the one in which it operates or has any interests. An example of this would be the Exxon Mobil oil spill. It is the responsibility of a business to protect the interests of the people, animals and environment where it uses resources. Due to improper handling of the issue, it became a public relations nightmare for the company. Exxon has now been ordered to clean up the area which it should have taken care not to damage in the first place. Indifference to business ethics in this case, caused a negative public image for the company and a huge lawsuit.
  • Issues regarding a company’s responsibility towards its shareholders. This is a heavily regulated area but one that requires a lot of government intervention due to certain unethical practices adopted by many companies in the past. The concept of increasing shareholder value is part of the fundamental principles of a company and if business ethics are not brought into play here, the business can collapse due to the pressure exerted by shareholders.
  • Inter-company dealings and negotiations. Often rivalries in business can turn ugly due to the amount of money and ego riding on them. Hostile takeovers and business espionage are some of the examples of unethical behavior within the business world. If discovered, these deeds can be punishable by law or simply public opinion. To allow for fair play and keeping the best interests of the consumers in mind, the government regulates a great deal of what goes on in company dealings. Microsoft has been the target of much abuse and outrage due to its allegedly monopolistic techniques of doing business. While this has not sunk the IT giant, many say that it may have long term repercussions. The government has also stepped in to make sure that other businesses and consumers are not harmed.
  • Stakeholder protection. Every business has stakeholders other than its owners – the employees, the stockholders and the general public. The business has to ensure that the rights and interests of all of these groups are adequately protected in the course of its operations. The recent outcry about the harassment and bad working conditions of employees in Wal-Mart led to the generation of a lot of negative press about the outsized department store. This gives the competition the lead and rivals take the opportunity to get ahead while the company is busy trying to do some damage control.
  • Fundamental business practices of a company. Underhanded dealings, the use of substandard products, spreading misinformation about the product, hiring illegal workers at lower than minimum wage, etc. prove that a business is run in an unethical way and that it is not a high quality work place or service provider. For instance, cigarette companies that spent most of the seventies telling people that it was not unhealthy to smoke, though they knew this to be untrue. In a recent judgment, one such company was forced to pay out $28 billion.
About the Author:
William King is the director of Wholesale UK Dropshipping & Wholesalers Trade Suppliers , Wholesale Dropship & Dropshippers Suppliers Directory , and Pakistan Property & Pakistani Real Estate Portal . He has 18 years of experience in the marketing and trading industries.

To Thine Own Self Be True – It’s Better for Business – What Arthur Anderson Would Say to His Company

Posted on 14. Apr, 2009 by in Business Ethics, Featured Articles

To Thine Own Self Be True

To Thine Own Self Be True

Shel Horowitz

As a child, you probably heard, “to thine own self be true.” But what does that really mean? When the newspapers are full of cheating and lying business owners, politicians, and academics, does it really make sense to maintain your integrity?

To me, the answer is a clear, unwaffling YES! Without your integrity, you really don’t have a business or a career–just a waiting game until you world comes crashing down around you.

But fear of being caught isn’t the reason to live your life with integrity. The real reasons are that it helps you get to where you really want to be, and lets you feel really good about yourself.

Sometimes, integrity involves taking risks. Here’s an example from my own career:

A graphic artist and I were at a pitch meeting to produce some materials for our local Board of Realtors. The organization had registered a very obscure domain name that only had meaning for them.

The “safe” thing to do would have been to nod our heads and continue the conversation. But when we heard the domain name, the graphic artist and I exchanged looks, and we started telling the organization why the domain they’d picked would be a marketing disaster. I told the executive director to imagine giving out that name on the radio, and to look at a name that would reinforce the group’s identity and message.

We went out on a limb; this was a free consultation during a meeting to pitch for business, and if someone was really attached to the name, we might never have gotten the job. But we all brainstormed a bunch of better domain names–and then a few months later I got a call from the president of the largest real estate firm in the service area. He had been impressed at that meeting and came to me to rewrite the firm’s entire collection of a dozen or so brochures–a very juicy assignment. By advising the client that its course was strewn with obstacles, I had put myself in the position to receive a much, much larger assignment, one for which I was not competing against any other copywriters.

Over and over again in my life, I’ve achieved or drawn closer to my goals by turning down work I didn’t feel good about, refusing to compromise with my core principles, treating others with respect, and expecting high standards of others. I’ve even had to educate a few clients about plagiarism as I refused their assignments.

Arthur Andersen, the founder of the accounting firm that was driven out of business by integrity failure, lost a major account after refusing the company’s request to engage in exactly the sort of unethical accounting that later brought down his company–early in his career, when he wasn’t sure he could meet his next payroll. He told the client that there was “not enough money in the city of Chicago” to change his mind. Too bad his successors didn’t understand this!

Article Source:

About the Author:
Copywriter, marketing consultant, and speaker Shel Horowitz is the author of Principled Profit: Marketing That Puts People First (, Grassroots Marketing: Getting Noticed in a Noisy World (, and other award-winning books.